This past June, the US inflation rate soared to 9.1%, the highest the country has seen since 1981. High inflation and the related financial stressors of increased everyday living expenses have the potential to ravage an individual’s savings. Moreover, inflation causes unpredictability in prices and markets, leaving employees with feelings of instability in their financial lives.
Financial experts say the US is headed into a recession, marked by layoffs, bankruptcies, higher borrowing costs, and unpredictability in the stock market. The impact of these tumultuous market conditions can be seen in the financial stress and concern of employees. In a 2020 report, 54 percent of American workers identified financial concerns as the leading source of their stress.
With the financial repercussions of the COVID-19 pandemic still lingering, people are struggling to manage their finances.
This offers an opportunity for employers to take a more active role in supporting their workforce, both by mitigating employee financial stress and in creating financial employee wellness programs.
The Reality of Employee Financial Stress
According to a 2022 PwC survey, 76 percent of employees say financial stress has a negative impact on their productivity. To address the job performance deficits caused by financial stress, it’s critical that employers first recognize what’s causing the issue.
For one, financial illiteracy can compound financial challenges. Employees lacking an understanding of their financial options can spend up to 6 hours during the workweek thinking about or addressing personal financial difficulties. Moreover, only 6 percent of working Americans have sought the advice of a financial advisor.
Another stressor is the lack of employee wellness programs that address financial issues. Since the start of the pandemic, only 25 percent of HR professionals say their business increased or enhanced current programs to help employees manage their financial stress.
The absence of both financial literacy initiatives and employee wellness programs affects the workforce in more ways than one may expect. Financially stressed employees are more likely to have restless nights, negatively impacting employee wellbeing, job performance, and relationships with coworkers.
So, how can employers help alleviate employee financial stress?
Three Ways Employers Can Alleviate Employee Financial Stress
Debt Management Plans
Between credit cards, personal loans, home mortgages, and student loans, the average American is $90,460 in debt. This has an overwhelming impact on one’s life, as according to a study by Northwestern Mutual, 58 percent with debt believe it has a significant or moderate influence on their ability to achieve long-term financial security.
Debt often interferes with a person’s ability to attain significant financial milestones such as saving for retirement, purchasing a home, having children, or getting married. In turn, that can negatively impact a person’s overall outlook and well-being, both personally and professionally at work.
As part of your well-being program, consider connecting employees with financial consultants who can help them create personalized debt management plans and provide employees with accessible and actionable financial wellness tips.
Seeing the light at the end of the tunnel is often enough to help people get started — and keep them motivated to keep going.
Unexpected emergencies can be emotionally taxing and financially stressful.
In 2020, more than one-fourth of individuals had one or more bills that they were unable to pay in full, or they were only one $400 financial setback away from being unable to pay them. This demonstrates how unprepared many employees may be for unexpected financial stressors and the importance for employers to support their employees’ financial wellbeing.
One way to help employees save for the unexpected?
Encourage employees to create a health savings account (HSA) and a flexible spending account (FSA). Both allow people to save for medical costs and have tax-saving advantages.
There are key differences between the two. HSAs are for saving pre-tax dollars and are associated with high-deductible health insurance plans to help alleviate the cost of a higher deductible. They can be carried over each year. FSAs are also pre-tax savings accounts and cover a wider variety of activities, such as childcare, but one must use-it-or-lose-it. These savings accounts are established by employers.
If your employees want to save for non-medical costs, talk to them about transferring a fixed amount of their paycheck from their checking account to savings account each month. Having extra cash at hand can be a huge factor in mitigating employee financial stress and preparing for unplanned emergencies.
59 percent of Americans accept they will have to work longer than anticipated and 36 percent fear they will never have enough money to retire. With 61 percent of employees reporting having trouble saving for retirement, employers have an opportunity to help alleviate this fear of financial stress.
Providing a retirement plan option for employees can help attract and retain employees, reducing turnover costs and improving employee well-being.
To help employees get the ball rolling, consider matching contributions to 401(k) plans, incentivizing employees to contribute and begin preparing for their retirement. Support automatic contribution escalation to retirement accounts – as recommended by the Consumer Financial Protection Bureau – which increases employee contribution rates over time. In some cases, this helped to raise average participation rates from 67 percent to more than 85 percent.
How Aduro Can Help
When considering the implications of employee financial stress, it’s critical to take financial well-being into consideration when offering a wellness program to employees.
Aduro’s integrated approach, with its Aduro® Connect platform and financial well-being coaches, supports employees in creating and achieving their financial goals, helps them progress toward financial stability, eliminates self-defeating money habits, and alleviates the stress often associated with such tasks.
Aduro’s holistic financial well-being resources bring awareness to spending habits and behaviors and can provide employers with the tools to alleviate employee financial stress.